Labour tries to out-Winston Winston

05/08/2014

Labour has forgotten that is trying to out Winston-Winston Peters on sales of land to foreigners:

The next Labour Government will keep rural and residential land in Kiwi hands, Labour’s Finance spokesperson David Parker says.

“New Zealanders are sick of seeing their farms and homes sold to overseas buyers with the profits and opportunities going offshore. No overseas person has the right to buy our land.

The opportunities stay here where the land is, so do the jobs which go with it.

The profit is only what’s left after costs – including the purchase price, wages, repairs and maintenance, development and tax – are paid.

A friend is New Zealand manager for overseas investors who own several farms. That company reinvests all its profit in the farms and adds more money from other investments elsewhere for development which includes a very expensive experiment with organic farming.

Their money is making the farms better and they are putting far more into the country than they are taking out.

“In all but the rarest of cases, sales of rural land to overseas buyers will be banned. Non-resident investors will also be banned from buying existing Kiwi homes.

What will those rarest cases be and who will decide?

“Changing who owns what already exists does nothing to increase New Zealand’s output. It just sells off New Zealand’s profit stream and kills off the Kiwi dream of owning our farms and homes.

It could increase New Zealand’s output if the investment improved production.

“Labour will reverse the current approach so that overseas buyers of rural land will have to prove they will create more jobs and exports than any New Zealand investor. Given New Zealanders are among the best farmers in the world it is an extremely hard hurdle to get over.

The hurdles overseas must leap are already very high and include the creation of jobs.  Among other conditions local buyers don’t have to meet but foreigners do is allowing public access.

New Zealand farmers are very good but they often lack the capital to be even better.

“This will ensure our farms are not priced out of the reach of New Zealanders.

If that is the case it would also mean the vendor gets less to invest elsewhere.

“We will also limit the discretion of the minister to ignore recommendations from the Overseas Investment Office.

“Labour will also restrict sales of residential homes to any non-residents unless they intend to move here, helping to keep the Kiwi home ownership dream alive, especially for young New Zealanders currently locked out of the housing market.

“The National Government is ignoring the legitimate concerns of New Zealanders about New Zealand land and houses being sold to overseas interests.

These concerns are largely based on emotion rather than facts.

A very small proportion of farm land is owned by foreigners and the problems with housing are largely a result of planning restricting the supply in Auckland and the earthquakes in Christchurch.

“Instead of accusing New Zealanders of being xenophobic, John Key and Steven Joyce should respect New Zealanders’ desire to keep New Zealand land in New Zealand hands,” David Parker says.

The accusation of xenophobia is because the protest is loud when it is a Chinese buyer and quiet to non-existent when it is from other countries like the USA, Britain, Australia or Germany.

Wee parties can get away with outrageous policies because they can always use the excuse they didn’t have the numbers to get them enacted.

The bigger parties are usually more circumspect.

Labour has forgotten this in trying to out Winston Winston Peters with this dog-whistle to the xenophobic.

It is also ignoring the benefits from the sale:

Stevenson Group, the concrete, quarrying and engineering firm that owns Lochinver Station, ran an extensive tender before agreeing to sell the 13,843 hectare farm to Shanghai Pengxin and says it will reinvest the funds in other businesses. . .

 The Stevenson family has owned Lochinver for 60 years but started as a drain-laying business in 1912, expanding into quarrying and construction in the late 1930s, and making concrete blocks from 1946. The original 5,260 ha Lochinver farm was acquired in 1958 and the family expanded to 16,595 ha “breaking the wild country into farming land” with “an enormous amount of hard work.”

“Farming is not the core business of Stevenson Group,” chief executive Mark Franklin told BusinessDesk. The company is freeing up capital to invest in other businesses such as expanding its Drury quarry, he said.

Franklin said the company had “really intensive discussions with lots of people both domestically and internationally. You can be very clear, anyone who was interested, I have spoken to.”

While Lochinver has a rateable value of more than $70 million, the purchase price hasn’t been disclosed. Still, Franklin said Pengxin’s offer wasn’t necessarily the highest on price alone and his company had considered a range of factors including retention of workers and the future of the property. Lochinver was more a farm enterprise than a farm. “In New Zealand a lot of people own farms but this is part of a supply chain.”

He said Pengxin had a long-term strategy to build a vertically integrated business.

The value in the property was “in its ability to grow a lot of grass,” which made it attractive for both dairy support and wintering stock, he said. Sheep farming was likely to remain a core part of the business. . .

The owner gets a large amount of money to invest in its core business, the new owner will bring money into the country, spend more on running and improving the property which will require employing locals and using local goods and services.

Federated Farmers which supports foreign investment in general has some concerns over the sale of Lochinver.

While Federated Farmers supports positive overseas investment into New Zealand’s farming system, it is concerned the potential sale of Lochinver Station to Shanghai Pengxin Group Co. Limited, may not provide sufficient benefit to New Zealand.

“Since there is no requirement to publicly notify applications to the Overseas Investment Office, Federated Farmers is frankly uneasy about the potential sale of Lochinver Station to Shanghai Pengxin,” says Dr William Rolleston, Federated Farmers President.

“New Zealand absolutely needs foreign investment but it has to be of benefit to the local and national economy. 

“That is why a ‘substantial and identifiable benefit’ test was incorporated into the overseas investment decision tree, further bolstered in 2012 by a High Court decision adding a “with and without” counterfactual test. 

“This was to ensure any investment, such as the one being proposed, has benefit over and above just making a farm work better.  Since Lochinver Station is highly regarded in farming circles there must be something very special and we are keen to know what that is. . .

He might be reassured by a speech Prime Minister John Key made to Federated Farmers in 2010:

. . . I want to take this opportunity to outline the Government’s position on overseas investment and talk about the changes we are making to the approvals regime.

In summary, we recognise the huge contribution that overseas investment makes to Kiwi jobs and Kiwi incomes.

New Zealand benefits from openness, both in trade and in investment.

However, New Zealanders have legitimate concerns about some aspects of overseas investment, particularly when it comes to land.

I share those concerns.

Good policy is a matter of striking the right balance.

We have reviewed the rules around overseas investment. For the most part, we think those rules are appropriate and the overall legislation is sound.

However, we have made a few adjustments to the approvals regime and given ministers increased flexibility to consider a wider range of issues when assessing proposed investments. . .

What I want to say first is that you, as individual farmers, and as members of Federated Farmers, have been right in the middle of recent debates about overseas investment, because a lot of those debates have been about land.

I’m sure that between you, you have some strong views and quite possibly some mixed views about overseas investment.

Unfortunately, much of the debate in recent months has been stirred up by politicians who are more concerned about getting on the news than they are about well-thought-out policy.

We are likely to see more of this tub-thumping and political posturing in the lead-up to next year’s election.

Politicians who were unwavering advocates of trade and investment when they were in government have somehow turned into defenders of Fortress New Zealand while in opposition.

Their views appear to have changed 180 degrees, for the sake of politics.

That is a shame, because at stake here are New Zealand jobs, New Zealand incomes, and New Zealand futures.

The reason we allow investment to flow between countries – both into New Zealand and out of New Zealand – is because it benefits New Zealanders.

We don’t do it for any other reason – we do it because we benefit from it.

In particular, overseas investment in New Zealand creates jobs, boosts incomes, and helps the economy grow.

Overseas capital can make things happen here that wouldn’t otherwise happen, grow businesses that wouldn’t otherwise have the means to grow, create jobs that otherwise wouldn’t exist, and pay wages that are higher than they would otherwise be.

Overseas capital makes New Zealand a vastly more productive country.

So there is absolutely no way we could enjoy the standard of living we do without overseas investment.

And part of that standard of living is being able to afford the education, law and order, and health services that our families want.

A recent study concluded that overseas investment in New Zealand lifted national income by around $5 billion between 1996 and 2006. That is an estimate of the return to New Zealand from overseas investment, over and above the cost of paying interest and dividends on that investment. . . .

He gave examples from the wine industry.

Since the year 2000 the number of wineries in New Zealand has almost doubled, and the industry directly employs 6,000 people.

This expansion of the wine industry into one of our most important export industries has largely happened because of overseas investment.

That investment has not just been into big producers, like Montana, but smaller wineries like Craggy Range, Sacred Hill, Dry River and Te Awa.

Overseas investment has allowed the industry to grow exponentially, and also develop from being a small and family-based sector into a more capital-intensive and technologically-advanced industry with real global connections.

Overseas investment also plays a positive role in New Zealand agribusiness, providing a vital source of capital for ongoing expansion and growth. PGG Wrightson, Synlait, CRV Ambreed and Anzco are good examples of such investment. . .

He also pointed out investment is a two-way street.

New Zealand businesses and individuals are themselves investing abroad.

There has been considerable investment, for example, by New Zealand dairy farmers in overseas farms. Fonterra, of course, has processing facilities in a number of different countries.

A free flow of investment also allows New Zealanders to diversify their savings across different countries and different industries. Most of the savings that are in the Super Fund, for example, and in many KiwiSaver funds, are invested overseas.

In fact, the total amount of equity investment into and out of New Zealand is surprisingly balanced. According to the latest figures, New Zealanders have around $53 billion of equity invested abroad while overseas investors have $61 billion of equity in New Zealand.

So international flows of investment – both into and out of New Zealand – are very important for our standard of living. . .

Then he addressed concerns about foreign investment:

I’m sure most people have these concerns from time to time, because as New Zealanders we have a very real and very profound sense of attachment to the land.

For one thing, our economy is based on agriculture so we recognise and respect that the land has an important economic value.

We also have a strong tradition of aspiring to own land – our own house, section, lifestyle block, farm, or block of native bush. We are not entirely comfortable as tenants – we want to put our roots down and call some place our own.

We also value outdoor pursuits – tramping, hunting, fishing, camping and picnicking – and even when we don’t do those activities, we like the fact that we could if we wanted to.

Our tourism marketing is very focused on New Zealand’s natural beauty, and we’re proud of it.

I have recently said myself that we don’t want to end up in a position where New Zealanders are tenants in their own country.

So I think the fact that people are concerned with overseas ownership is perfectly legitimate.

But we should be careful not to let those concerns get out of hand.

For a start, about a third of New Zealand – including our most iconic land – is protected by being in the conservation estate. So no-one from overseas can come in and buy Mt Taranaki or the Franz Josef Glacier, for example.

Second, it is a simple fact that land can’t change nationality. People can change nationality, of course, and factories can be relocated overseas. But a piece of land in New Zealand will always be here in New Zealand.

Because it will always be here, the use of that land will always be subject to New Zealand laws and regulations. And ultimately we as New Zealanders get to determine what those laws and regulations will be.

Third, and contrary to what some people might think, there hasn’t been an acceleration of overseas sales in recent years.

In fact, as at a couple of days ago, only 11, 203 hectares of land has been sold so far this year. That is certainly well below the peak of 380,000 hectares that were sold in 2006.

Fourth, the issue of whether businesses and properties are owned by New Zealanders or people from overseas, is for the most part, squarely in our own hands.

What I mean is that no-one can be forced to sell their business to an overseas investor, just as no farmers can be compelled to sell their land to foreigners.

Obviously with mortgagee sales or receiverships things get a little more complicated but, in general, people who feel very strongly that New Zealand-based assets should remain in New Zealand hands are free to sell only to New Zealanders.

The problem is that it’s people who don’t own the land who are complaining and wanting to dictate to whom the owners can sell.

Moreover, New Zealanders can always buy land and other assets back. What makes that difficult isn’t the rules around overseas investment, it is the fact that New Zealand has a poor savings record and therefore a relatively small stock of capital available for investment.

If, as a country, we saved more, we would own more of the assets in New Zealand, including land, as well as being less in debt to overseas lenders.

Finally, there are specific safeguards contained in the Overseas Investment Act and in the regulations which the government makes under that Act.

Over the past year or so the Government has been reviewing this system of rules, to make sure we have got the balance right between three key objectives:

welcoming desirable investment, in recognition of the benefits it brings for New Zealanders

providing a stable investment environment, where the rules are settled and everyone is clear about what they are; and

addressing public concerns about overseas investment, particularly in regard to land.

This review has come to three conclusions.

The first conclusion is that the Overseas Investment Act is a fundamentally sound piece of legislation.

The Act makes it clear that it is a privilege for overseas people to own or control sensitive New Zealand assets.

In particular, it lays out that foreign investment in land is only acceptable if it substantially benefits New Zealand, according to a range of factors which include, among other things:

  • the creation of new job opportunities in New Zealand
  • the introduction into New Zealand of new technology
  • increased export receipts for New Zealand exporters
  • the introduction into New Zealand of additional investment for development purposes
  • increased processing in New Zealand of New Zealand’s primary products
  • protection of native bush and other indigenous vegetation; and
  • protection of game species and walking access.
  • In addition, farm land has to be offered on the open market so that New Zealanders can bid for it as well.

These are very stringent criteria.

In fact, these are the very same criteria that Phil Goff was trying to pass off as brand new policy a few weeks ago. I welcome his endorsement of the current provisions of the Overseas Investment Act which, of course, was passed by his government back in 2005. . .

The third conclusion we came to was that a couple of additions should be made to the existing rules.

These additions would make sure that all public concerns about overseas investment, both now and in the future, could be covered off under the rules.

So the Government is adding two more factors that ministers must consider when they assess the benefits of a proposed overseas investment in New Zealand land.

The first new factor is very wide-ranging and looks at whether New Zealand’s economic interests will be adequately promoted by overseas investment.

This will allow ministers to consider, for example, whether any of our key exports are in danger of being controlled by an overseas entity, or whether there are non-commercial motivations driving a proposed overseas investment.

The second new factor is a “mitigating factor” which looks at whether the investor has a meaningful commitment to New Zealand involvement in the running or oversight of the investment.

That could include, for example, part ownership with New Zealanders, appointing New Zealanders to the board, or listing on a New Zealand exchange.

These two new factors will be weighed up alongside all the existing factors when ministers consider applications for investment.

We are also going to outline the Government’s policy on foreign investment more clearly by amending the Directive Letter issued to the Overseas Investment Office.

This will make things clearer for both the Office and for overseas investors.

So in conclusion can I stress that we allow overseas investment to flow between countries – both into New Zealand and out of New Zealand – because it benefits New Zealanders.

With the appropriate checks and balances in place, this investment is good for jobs, wages and growth.

After reviewing the overseas investment regime, and making some amendments to it, the Government is satisfied that we do now have the appropriate checks and balances. . .

National strengthened those checks and balances.

Foreign investors must jump very high hurdles and if they don’t meet the conditions imposed on them by the OIO – conditions which are strictly monitored – they cannot keep the property.

The Overseas Investment Office has yet to make its decision on the sale of Lochinver.

If it does approve the deal, the strict criteria it must apply, made stricter by National, will ensure that the benefits to New Zealand are greater than any which would come from the sale to a New Zealander.


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